HY Results 2010

Reckitt Benckiser A World Leader in Household, Health and Personal Care 26 July 2010 FIRST HALF RESULTS IN LINE WITH FY10 TARGETS Results at a glance Q2* % change % change HY % change % change £m actual constant £m actual constant (unaudited) exchange exchange exchange exchange Net revenue 2,061 +10 +6 4,064 +7 +6 Operating profit 503 +21 +17 964 +18 +17 Net income 380 +23 +18 728 +19 +18 EPS (diluted) 51.8p +20 99.2p +17 * Q2 results were not subject to the independent review. Half Year (HY) highlights: * Total net revenue +6% (constant exchange) to £4,064m. Excluding Reckitt Benckiser Pharmaceuticals (RBP), net revenue was ahead +5% (at constant), supported by new initiatives and investment in the Group's 17 Powerbrands. * Gross margin +90bp to 60.0%: operating margin +210bp to 23.7% (ex-RBP: +100bp to 20.0%). * Net income +19% (actual exchange): diluted EPS of 99.2p (+17%). * Net cash of £577m (31 December 2009: £220m), as a result of ongoing strong free cash flow generation. * Net working capital of minus £1,229m, £28m above the 31 December 2009 level. * The Board declares a +16% increase in the interim dividend to 50.0p per share. Q2 highlights: * Total net revenue +6% (constant exchange). Excluding RBP, net revenue increased +5% (constant), consistent with the growth rate achieved in Q1. * Gross margin +90bp to 60.5%: operating margin +230bp to 24.4% (ex-RBP: +90bp to 19.9%). * Net income +23% (actual exchange): diluted EPS of 51.8p (+20%). Commenting on these results, Bart Becht, Chief Executive Officer, said: "Reckitt Benckiser's first half results (excluding RBP) were in line with our full year targets, with net revenue growth of +5% and operating profit growth of +10% (both at constant exchange). This performance benefited from excellent growth in Developing Markets, and the success of new Powerbrand product initiatives such as Lysol No Touch and Air Wick Aqua Mist. The total Group delivered an even stronger result, with net revenue growth of +6% and net income growth of +18%, both at constant exchange. We are re-iterating our full year targets for the Group ex-RBP assuming no change in current market conditions, being net revenue growth of +5% and operating profit growth of +10% (both at constant exchange). For the total Group, we are confident of delivering another year of good growth in 2010, notwithstanding potential generic competition to Suboxone in the U.S." Detailed Operating Review: Total Group Second quarter 2010 Q2 net revenue increased +10% to £2,061m, with growth of +6% at constant exchange. The gross margin improved by +90bp to 60.5%, largely as a result of input cost savings, a positive transaction impact from foreign exchange and benefits from cost optimisation programmes. Total marketing investment was higher, and pure media investment rose +12% (+7% constant) to a level of 11.6% of net revenue. There was also significant growth in Other Consumer Marketing, as savings from more favourable media rates were re-invested in other activities. Operating profit was £503m, +21% higher than last year (+17% constant): the operating margin increased by +230bp to 24.4% due to gross margin expansion and operating cost efficiencies. Excluding RBP, operating profit rose +14% to £374m (+10% constant), equating to a +90bp improvement in the margin. Net finance income was £4m (Q2 2009: £1m), reflecting strong free cash flow generation during the quarter. The tax rate was 25%. Net income was £380m, an increase of +23% versus Q2 2009 (+18% constant). Diluted earnings per share increased +20% to 51.8 pence. Half year 2010 HY net revenue increased +7% to £4,064m, with growth of +6% at constant exchange. The gross margin improved by +90bp to 60.0%, largely as a result of input cost savings, a positive transaction impact from foreign exchange and benefits from cost optimisation programmes. Total marketing investment was higher, and pure media investment increased +4% (+2% constant), equating to a level of 11.7% of net revenue. There was also significant growth in Other Consumer Marketing, as savings from more favourable media rates were re-invested in other activities. Operating profit was £964m, +18% higher than last year (+17% constant). The operating margin increased by +210bp to 23.7% due to gross margin expansion and operating cost efficiencies. Excluding RBP, operating profit rose +12% to £749m (+10% constant), equating to a +100bp improvement in the margin. Net finance income was £7m (HY 2009: net finance expense of £3m), reflecting strong free cash flow generation during the half year. The tax rate was 25%. Net income was £728m, an increase of +19% (+18% constant) on HY 2009. Diluted earnings per share increased +17% to 99.2 pence. HY 2010 Business Review Summary: % net revenue growth Like-for-like Exchange Reported Europe -1% -1% -2% NAA +4% +2% +6% DvM +19% +7% +26% Group ex-Pharma +5% +1% +6% Pharma* +24% -2% +22% TOTAL +6% +1% +7% * Pharma represents the Group's prescription drug business of Subutex and Suboxone The Business Review below is given at constant exchange rates. Europe 43% of net revenue HY 2010 total net revenue decreased -1% to £1,752m. Growth in Dishwashing and Home Care was more than offset by weakness in Fabric Care, with a relatively flat result in Health & Personal Care reflecting the weak incidence of cold/ 'flu in Q1. The increase in Home Care was supported by the launch of Airwick Aqua Mist, while growth in Dishwashing came from Quantum, dishwashing additives and the launch of Quantumatic. The result in Fabric Care was impacted by increased competitive activity for Vanish, and weakness in Laundry Detergent and Water Softener. For the half year, the operating margin was +30bp ahead of last year at 22.9%, with operating profit consistent with HY 2009 at £401m. In Q2, net revenue declined -1% to £846m. Operating profit was in line with the prior year at £195m, with the margin up +20bp to 23.0%. North America & Australia 26% of net revenue HY 2010 total net revenue increased +4% to £1,073m, with growth led by Fabric Care, Surface Care, Home Care and Health & Personal Care. The result in Fabric Care was supported by growth in Resolve and the launch of Woolite Complete, while growth in Surface Care came from Lysol Multi-Purpose Spray. The increase in Home Care was helped by the launch of Airwick Aqua Mist in Air Care, and a strong finish to the pest season in Australia in Q1. The launch of the Lysol No Touch Hand Soap System delivered an encouraging early result, helping to mitigate the impact on Mucinex of a weak cold/'flu season in Q1. Food increased as a result of a very good performance across the consumer portfolio, in particular further growth for French's Yellow Mustard, French's Fried Onions and Frank's Red Hot Sauce, and boosted by new variants. For the half year, operating profit increased +16% to £206m; the operating margin was +240bp higher at 19.2%. Q2 net revenue rose +4% (+5%, continuing operations) to £545m and operating profit was ahead by +19% to £101m, equating to a +270bp uplift in the margin to 18.5%. Developing Markets 23% of net revenue HY 2010 total net revenue was ahead +19% to £929m, with growth evident across all regions. In Fabric Care, increased marketing investment helped drive a strong performance for Vanish, while Dettol, Harpic and Veja all contributed to growth in Surface Care. The result in Home Care was supported by Air Wick automatic spray and Aqua Mist in Air Care, and Mortein automatic spray in Pest Control. In Health & Personal Care, the Dettol personal care range, comprising bar and liquid soaps and shower gels, continued to deliver excellent growth. Veet, Strepsils and Gaviscon also contributed strongly. For the half year, operating profit increased by +37% to £142m. This resulted in a +200bp improvement in the operating margin to 15.3%. Q2 net revenue increased by +18% to £491m. Operating profit improved +28% to £ 78m, with a +170bp uplift in the margin to 15.9%. Pharmaceuticals 8% of net revenue HY 2010 total net revenue for the Group's Subutex and Suboxone prescription drug business grew +24% to £310m. These buprenorphine-based products are used to treat opiate dependence. Growth was predominantly driven by a continued increase in penetration of Suboxone in the U.S. For the half year, the operating margin improved by +1,070bp to 69.4%. Operating profit was £215m, an increase of +48%. Q2 net revenue increased by +21% to £179m. Operating profit increased +47% to £ 129m, for a +1,200bp expansion in the margin to 72.1%. Suboxone has data exclusivity in Europe until 2016; in the U.S., Suboxone lost the exclusivity afforded by its Orphan Drug Status on 8th October 2009. Within the Pharmaceuticals division, the U.S. Suboxone business generated HY 2010 net revenue of £268m and adjusted operating profit of £192m. While the Group continues to search for ways to offset the impact of the loss of exclusivity in the U.S., up to 80% of the revenues and profits of that business might be lost in the year following the launch of generic competitors, with the possibility of further erosion thereafter. HY 2010 Category Review (at Constant Exchange Rates) Health & Personal Care 26% of net revenue Net revenue increased +7% to £1,070m. In Personal Care, there was strong growth in both the Dettol and Lysol ranges. In Dettol, there was excellent growth in the personal care range in Developing Markets and in Europe, while the launch of the Lysol No Touch Hand Soap System in North America delivered a very encouraging early result. Veet and Clearasil also increased, helped by such new initiatives as the Suprem'Essence range with essential oils and Clearasil Overnight. In Healthcare, a strong result for Gaviscon was mitigated by the impact on Mucinex and Strepsils of the lower incidence of cold/'flu in Q1. In Q2, Health & Personal Care rose +10% to £546m. Fabric Care 20% of net revenue Net revenue decreased -1% to £805m. Good growth for Vanish (and equivalent brands) in Developing Markets and North America & Australia was largely offset by Europe due to increased competitive activity. The result was also impacted by weakness in Laundry Detergents and Water Softeners. Q2 net revenue declined -3% to £398m. Surface Care 17% of net revenue Net revenue grew +5% to £686m, with growth in both the Dettol and Lysol ranges and Veja. Harpic Lavatory Care performed well, helped by such new initiatives as Harpic liquid 5x. Q2 growth was +3% to £343m. Home Care 14% of net revenue Net revenue increased +8% to £562m. In Air Care, growth was supported by the launch of Airwick Aqua Mist, while a good pest season in Q1 and new initiatives underpinned the performance in Pest Control. Q2 growth was +4% to £268m. Dishwashing 11% of net revenue Net revenue increased +2% to £453m, due to the continued success of Finish Quantum and growth in dishwashing additives, as well as the launch of Finish Quantumatic. Q2 net revenue was +3% at £216m. Total Household and Health & Personal Care. Net revenue was ahead by +4% to £ 3,608m. In Q2, total Household and Health & Personal Care grew +5% to £1,802m. Pharmaceuticals 8% of net revenue HY 2010 net revenue for the Group's Subutex and Suboxone prescription drug business grew +24% to £310m, predominantly driven by a continued increase in penetration of Suboxone in the U.S. Operating profit was ahead +48% to £215m, equating to a +1,070bp improvement in the margin to 69.4%. Q2 net revenue increased by +21% to £179m, while operating profit rose +47% to £129m. Food 4% of net revenue Net revenue grew +12% to £146m with a very good performance across the consumer portfolio, in particular further growth for French's Yellow Mustard, French's Fried Onions and Frank's Red Hot Sauce. Operating profit increased +44% to £ 37m. Q2 net revenue grew +9% and operating profit was £22m (+42%). New Initiatives: H2 2010 The Group has announced a number of new product initiatives for the second half of 2010: In Health & Personal Care: * Launch of the Lysol No-Touch Hand Soap System under the Dettol brand. This new Dettol system removes the need to tough a grimy soap pump ever again, helping to stop the spread of germs and infection. * Continued roll-out of Dettol personal care products into new geographies including Israel, Sweden and Romania, following on from Brazil, Turkey, Italy and Poland (amongst others) during the first half year. * Launch of Strepsils Warm, combining a comforting warming sensation with effective sore throat relief. * Launch of Nurofen for Children, an ibuprofen suspension offering fever and pain relief specifically to children over the age of six years. * Launch of Children's Mucinex Multi-Symptom Cold Liquid, providing relief from a stuffy nose, a cough and chest infection. In Surface Care: * Launch of Lysol Neutra Air, a fabric mist which both kills germs and eliminates odours on soft surfaces. In Home Care: * Launch of Air Wick Touch of Luxury, providing consumers with more luxurious fragrancing and available in <i>-motion, Freshmatic and electrical formats. * Launch of Air Wick Ribbons under the Touch of Luxury range, a premium candle with the benefit of "super-fragrancing", delivered through fragrance ribbons packed with essential oils. In Dishwashing: * Launch of Finish Quantum Target, an improved formula with new cleansing microbeads to target and soften even the toughest stains, as well as amazing shine and cleaning. * Launch of Finish Shine + Dry dishwashing additive, with new Quick-Dry formula which actively removes water spots and drops for sparkling dry dishes straight from the dishwasher. HY 2010 Financial Review Basis of preparation. The unaudited financial information is prepared in accordance with IFRSs as adopted by the European Union and IFRSs as issued by the International Accounting Standards Board, and with the accounting policies set out in the Group's 2009 Annual Report & Financial Statements, except as explained in Note 3 to the Half Year Condensed Financial Statements. Constant exchange. Movements in exchange rates relative to sterling affect actual results as reported. The constant exchange rate basis adjusts the comparative to exclude such movements, to show the underlying growth of the Group. Net finance income. Net finance income was £7m (2009: net finance expense of £ 3m), reflecting the Group's net cash position and strong free cash flow generation during the half year. Tax. The underlying tax rate is 25% (2009: 25%). Net working capital (inventories, short-term receivables and short-term liabilities excluding borrowings and provisions) of minus £1,229m was £28m higher than the 31 December 2009 level. Cash flow. Cash generated from operations was -3% lower at £1,090m (2009: £ 1,128m), and net cash flow from operations was £692m, -22% (2009: £884m). Net interest received was £14m higher at £7m (2009: net interest paid of £7m) and tax payments increased by £211m to £386m (2009: £175m) following the settlement of a number of outstanding matters. Net capital expenditure (including intangibles) was £43m lower than the prior year at £19m (2009: £62m), owing to the disposal of a minor brand. Net cash at the end of the half year was £577m (31 December 2009: £220m), an increase of £357m. This reflected net cash flow from operations of £692m, partially offset by the payment of the final 2009 dividend of £411m. The Group regularly reviews its banking arrangements and currently has adequate facilities available to it. Balance sheet. At 30 June 2010, the Group had shareholders' funds of £4,490m (31 December 2009: £4,014m), an increase of +12%. Net cash was £577m (31 December 2009: £220m) and total capital employed in the business was £3,913m (31 December 2009: £3,794m). This finances non-current assets of £7,033m (31 December 2009: £6,891m), of which £630m (31 December 2009: £639m) is tangible fixed assets, the remainder being goodwill, other intangible assets, deferred tax, available for sale financial assets and other receivables. The Group has net working capital of minus £1,229m (31 December 2009: minus £1,257m), current provisions of £60m (31 December 2009: £88m) and long-term liabilities other than borrowings of £1,819m (31 December 2009: £1,752m). Dividends. The Board of Directors declares an interim dividend of 50.0p (2009: 43.0p), an increase of +16%. The ex-dividend date will be 4 August and the dividend will be paid on 30 September to shareholders on the register at the record date of 6 August. The last date for election for the share alternative to the dividend is 9 September. Contingent liabilities. The Group is involved in a number of investigations by competition authorities in Europe. Where it is too early to determine the likely outcome of these matters, the Directors have made no provisions for such potential liabilities. As disclosed at the year end, the Group has received a Statement of Objections from the Office of Fair Trading in the United Kingdom regarding alleged anti-competitive activity involving the Gaviscon brand. In the event that the Office of Fair Trading finds against the Group, it may impose a fine of up to the statutory maximum of ten percent of Group worldwide turnover. The Board considers it appropriate to disclose a contingent liability in this regard. The Directors at this stage believe that there are substantive questions of law brought forward by the Statement of Objections, questions that have not been settled in prior competition law cases and which require thorough analysis and debate. Post balance sheet events. Recommended cash offer to acquire SSL International plc On 21st July 2010, the Boards of Reckitt Benckiser Group plc and SSL International plc ("SSL") announced that they had reached agreement on the terms of a recommended cash offer to acquire the entire issued and to be issued share capital of SSL (the "Offer"). Under the terms of the Offer, SSL shareholders will be entitled to receive 1,163 pence in cash for each SSL share, and will also remain entitled to receive the proposed final SSL dividend of 8 pence per share in respect of the year ended 31 March 2010, representing, in aggregate, 1,171 pence per SSL share. The Offer price plus the SSL dividend values SSL's fully-diluted share capital at approximately £2,540m. It is currently expected that, if successful, the Offer would become or be declared unconditional in all respects during the fourth quarter of 2010. For more information, a copy of the full announcement of this recommended cash Offer is available on the Group's website ( www.rb.com/Investors-media/ reckitt-benckiser-offer-for-SSL-International). Buy back of the remaining rights to Suboxone and Subutex Further to an announcement on 19th March 2010, the majority of the sales and marketing rights to the buprenorphine-containing products Suboxone, Subutex and Temgesic reverted to the Group, starting 1st July 2010. The rights apply to a number of countries in Europe and Rest of the World, and the consideration for the rights was approximately £100m. 2010 Targets The Group is re-iterating its full year targets for the business excluding RBP assuming no change in current market conditions, being net revenue growth of +5% (continuing operations, base: £7,144m) and operating profit growth of +10% (continuing operations, base: £1,512m), both at constant exchange. For the total business, the Group is confident of delivering another year of good growth in 2010, notwithstanding potential generic competition to Suboxone in the U.S. Principal Risks and Uncertainties The Directors consider that the principal risks and uncertainties which could have a material impact on the Group's performance in the remaining six months of 2010 are the same as described on page 6 of the Annual Report and Financial Statements for the year ended 31 December 2009. These include: * Market risks: * + Demand for the Group's products adversely affected due to changes in consumer preference. + Customer de-listing of the Group's brands. + Competition may reduce market share and margins. + Competition from private label and unbranded products may intensify. + The expiry of the Group's exclusive licence for Suboxone in the U.S. in 2009, with the possibility that the Group will not develop new forms that offer new intellectual property protection beyond 2009. * Operational risks: * + Unfavourable economic or business conditions in the markets in which the Group operates. + New product innovation declines or becomes less relevant to consumers. + Increased costs or shortages of raw and packaging materials. + Financial difficulties for a major supplier or customer. + Adverse changes in the regulatory environment. + Fluctuations in foreign exchange and interest rates. + Failure to protect the Group's intellectual property rights. + Disruption or failure of the Group's information technology systems. + Departure or increased turnover of key management. * Environmental, social and governance risks: * + Industry sector and regulatory risks. + Product quality and safety risks to consumers. + Potential reputational risks around the supply chain. * Financial risks: * + Risk exposures in relation to tax, treasury, financial controls and reporting. The Group's Annual Report and Financial Statements for the year ended 31 December 2009 are available on the Group's website at www.rb.com. The Group at a Glance (Unaudited) Quarter ended 30 June Half year ended 30 June 2010 2009 2010 2009 £m £m £m £m 2,061 1,872 Net revenue - total 4,064 3,783 +6% +8% Net revenue growth - +6% +8% constant +10% +20% Net revenue growth - total +7% +23% 60.5% 59.6% Gross margin 60.0% 59.1% 532 444 EBITDA 1,025 881 25.8% 23.7% EBITDA margin 25.2% 23.3% 503 414 EBIT 964 819 24.4% 22.1% EBIT margin 23.7% 21.6% 507 415 Profit before tax 971 816 380 310 Net income 728 613 52.4p 43.6p EPS, basic 100.7p 86.3p 51.8p 43.0p EPS, diluted 99.2p 85.1p . Group balance sheet data 30 June 31 December 2010 2009 £m £m Net working capital * (1,229) (1,257) Net cash 577 220 * Net working capital is defined as inventories, short-term receivables and short-term liabilities, excluding borrowings and provisions. Shares in issue First half Millions 31 December 2009 719.9 Issued / transferred from Treasury 4.9 31 March 2010 724.8 Issued / transferred from Treasury 0.4 30 June 2010 725.2 Group Income Statement Analysis (Unaudited) Quarter ended Half year ended 30 June 30 June 2010 2009 % change 2010 2009 % change £m £m £m £m 2,061 1,872 +10 Net revenue 4,064 3,783 +7 (815) (757) Cost of sales (1,627) (1,549) 1,246 1,115 +12 Gross profit 2,437 2,234 +9 (743) (701) Net operating expenses (1,473) (1,415) 503 414 +21 Operating profit 964 819 +18 4 1 Net finance income / (expense) 7 (3) 507 415 +22 Profit on ordinary activities 971 816 +19 before taxation (127) (105) +21 Tax on profit on ordinary (243) (203) +20 activities 380 310 +23 Net income 728 613 +19 - - Attributable to equity minority - - interests 380 310 Attributable to ordinary equity 728 613 holders of the parent 380 310 Net income 728 613 Earnings per ordinary share: 52.4p 43.6p On net income for the period, 100.7p 86.3p basic 51.8p 43.0p On net income for the period, 99.2p 85.1p diluted Average common shares outstanding: (millions) 724.9 711.9 Basic 722.9 710.7 733.5 721.6 Diluted 734.0 720.7 Segment Information (Unaudited) Analyses by operating segment of net revenue and adjusted operating profit, and of net revenue by product group are set out below. The Executive Committee of the Group assesses the performance of the operating segments based on net revenue and adjusted operating profit. This measurement basis excludes the effect of exceptional items. There have been no exceptional items in the current and prior periods. The adjusted operating profit is the same as the reported operating profit. Operating segment Quarter ended Half year ended 30 June 30 June 2010 2009 % Change 2010 2009 % Change £m £m exch. rates £m £m exch. rates actual const. actual const. Net revenue 846 864 -2 -1 Europe 1,752 1,782 -2 -1 545 486 +12 +4 North America & 1,073 1,008 +6 +4 Australia 491 379 +30 +18 Developing Markets 929 739 +26 +19 179 143 +25 +21 Pharmaceuticals 310 254 +22 +24 2,061 1,872 +10 +6 4,064 3,783 +7 +6 Operating profit 195 197 -1 +0 Europe 401 403 +0 +0 101 77 +31 +19 North America & 206 169 +22 +16 Australia 78 54 +44 +28 Developing Markets 142 98 +45 +37 129 86 +50 +47 Pharmaceuticals 215 149 +44 +48 503 414 +21 +17 964 819 +18 +17 % % Operating margin % % 23.0% 22.8% Europe 22.9% 22.6% 18.5% 15.8% North America & 19.2% 16.8% Australia 15.9% 14.2% Developing Markets 15.3% 13.3% 72.1% 60.1% Pharmaceuticals 69.4% 58.7% 24.4% 22.1% 23.7% 21.6% Segment Information (Unaudited), continued Product segment Quarter ended Half year ended 30 June 30 June 2010 2009 % change 2010 2009 % change £m £m exch. rates £m £m exch. rates actual const. actual const. Net revenue by category 546 473 +15 +10 Health & Personal Care 1,070 978 +9 +7 398 401 -1 -3 Fabric Care 805 807 +0 -1 343 314 +9 +3 Surface Care 686 635 +8 +5 268 245 +9 +4 Home Care 562 509 +10 +8 216 205 +5 +3 Dishwashing 453 440 +3 +2 31 20 +55 +68 Other Household 32 28 +14 +19 1,802 1,658 +9 +5 Household and Health & 3,608 3,397 +6 +4 Personal Care 179 143 +25 +21 Pharmaceuticals 310 254 +22 +24 80 71 +13 +9 Food 146 132 +11 +12 2,061 1,872 +10 +6 4,064 3,783 +7 +6 Operating profit 352 313 +12 +9 Household and Health & 712 645 +10 +9 Personal Care 129 86 +50 +47 Pharmaceuticals 215 149 +44 +48 22 15 +47 +42 Food 37 25 +48 +44 503 414 +21 +18 964 819 +18 +17 % % Operating margin % % 19.5% 18.9% Household and Health & 19.7% 19.0% Personal Care 72.1% 60.1% Pharmaceuticals 69.4% 58.7% 27.5% 21.1% Food 25.3% 18.9% 24.4% 22.1% 23.7% 21.6% For further information, please contact: Reckitt Benckiser +44 (0)1753 217800 Joanna Speed Director, Investor Relations Andraea Dawson-Shepherd SVP, Global Corporate Communication and Affairs Brunswick (Financial PR) +44 (0)20 7404 5959 Susan Gilchrist Senior Partner Notice to shareholders These half year condensed financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2009 were approved by the Board of Directors on 15 March 2010 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. These half year condensed financial statements have been reviewed, not audited. Cautionary note concerning forward-looking statements This document contains statements with respect to the financial condition, results of operations and business of Reckitt Benckiser and certain of the plans and objectives of the Group with respect to these items. These forward-looking statements are made pursuant to the "Safe Harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. In particular, all statements that express forecasts, expectations and projections with respect to future matters, including trends in results of operations, margins, growth rates, overall market trends, the impact of interest or exchange rates, the availability of financing to the Company, anticipated cost savings or synergies and the completion of strategic transactions are forward-looking statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors discussed in this report, that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including many factors outside Reckitt Benckiser's control. Past performance cannot be relied upon as a guide to future performance. Half Year Condensed Financial Statements (Unaudited) Group Income Statement (Unaudited) For the six months ended 30 June At 30 June At 30 June Full Year 2010 2009 2009 Notes £m £m £m Net revenue 4 4,064 3,783 7,753 Cost of sales (1,627) (1,549) (3,089) Gross profit 2,437 2,234 4,664 Net operating expenses (1,473) (1,415) (2,773) Operating profit 4 964 819 1,891 Finance income 8 10 17 Finance expense (1) (13) (16) Net finance income / (expense) 7 (3) 1 Profit on ordinary activities before 971 816 1,892 taxation Tax on profit on ordinary activities 6 (243) (203) (474) Net income for the period 728 613 1,418 Attributable to equity minority - - - interests Attributable to ordinary equity 728 613 1,418 holders of the parent Net income for the period 728 613 1,418 Earnings per ordinary share: On net income for the period, basic 7 100.7p 86.3p 198.9p On net income for the period, 7 99.2p 85.1p 194.7p diluted Group Statement of Comprehensive Income (Unaudited) For the six months ended 30 June 30 June 30 June Full Year 2010 2009 2009 £m £m £m Net income for the period 728 613 1,418 Other comprehensive income Net exchange adjustments on foreign 80 (352) (191) currency translation, net of tax Actuarial gains and losses, net of tax (23) (69) (68) Available for sale reserve, net of tax - 8 8 Gains / (losses) on cash flow hedges, 2 (10) (15) net of tax Other comprehensive income for the 59 (423) (266) period, net of tax Total comprehensive income for the 787 190 1,152 period Attributable to equity minority - - - interests Attributable to ordinary equity 787 190 1,152 shareholders of the parent 787 190 1,152 Group Balance Sheet (Unaudited) At 30 June At 30 At 31 June December 2010 2009 2009 Notes £m £m £m ASSETS Non-current assets: Goodwill and other intangible assets 6,244 5,914 6,090 Property, plant and equipment 9 630 590 639 Deferred tax assets 122 117 121 Available for sale financial assets 11 20 16 Other receivables 26 20 25 7,033 6,661 6,891 Current assets: Inventories 479 458 486 Trade and other receivables 1,086 892 928 Derivative financial instruments - 9 1 Available for sale financial assets 12 5 4 Cash and cash equivalents 653 511 351 2,230 1,875 1,770 Total assets 9,263 8,536 8,661 LIABILITIES Current liabilities: Borrowings 10 (85) (1,026) (132) Provisions for liabilities and charges 11 (60) (64) (88) Trade and other payables (2,570) (2,191) (2,286) Tax liabilities (236) (398) (385) (2,951) (3,679) (2,891) Non-current liabilities: Borrowings 10 (3) (6) (4) Deferred tax liabilities (1,183) (1,073) (1,145) Retirement benefit obligations 5 (430) (379) (393) Provisions for liabilities and charges 11 (42) (41) (36) Tax liabilities (158) (128) (158) Other non-current liabilities (6) (14) (20) (1,822) (1,641) (1,756) Total liabilities (4,773) (5,320) (4,647) Net assets 4,490 3,216 4,014 EQUITY Capital and reserves: Share capital 12 73 72 72 Share premium 46 - - Merger reserve (14,229) (14,229) (14,229) Hedging reserve - 3 (2) Available for sale reserve - - - Foreign currency translation reserve 309 80 229 Retained earnings 18,289 17,288 17,942 4,488 3,214 4,012 Equity minority interests 2 2 2 Total equity 4,490 3,216 4,014 Group Cash Flow Statement (Unaudited) For the six months ended 30 June 30 June 30 June Full Year 2010 2009 2009 Notes £m £m £m CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from operations: Operating profit 964 819 1,891 Depreciation of property, plant & equipment, 61 61 139 amortization and impairment of intangible assets Fair value losses / (gains) - 8 (15) Profit on sale of property, plant and equipment (29) - - and intangible assets Other non-cash movements - (9) 2 Decrease in inventories 16 47 39 (Increase) in trade and other receivables (181) (36) (12) Increase in payables and provisions 227 208 220 Share award expense 32 30 59 Cash generated from operations: 1,090 1,128 2,323 Interest paid (2) (18) (23) Interest received 9 11 19 Tax paid (386) (175) (371) Net cash generated from operating activities 711 946 1,948 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment and (53) (64) (158) intangible assets Disposal of property, plant and equipment and 34 2 11 intangible assets (Purchase) / Maturity of short-term investments (8) - 1 Maturity of long-term investments 7 1 18 Net cash used in investing activities (20) (61) (128) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of ordinary shares 67 44 131 Repayments of borrowings (102) (463) (1,359) Dividends paid to the Company's shareholders 8 (411) (341) (648) Net cash (used) / generated in financing (446) (760) (1,876) activities Net increase / (decrease) in cash and cash 245 125 (56) equivalents Cash and cash equivalents at beginning of period 334 398 398 Exchange gains / (losses) 5 (28) (8) Cash and cash equivalents at end of period 584 495 334 Cash and cash equivalents comprise Cash and cash equivalents 653 511 351 Overdrafts (69) (16) (17) 584 495 334 RECONCILIATION OF NET CASH FLOW FROM OPERATIONS Net cash generated from operating activities 711 946 1,948 Net purchases of property, plant and equipment (19) (62) (145) Net cash flow from operations 692 884 1,803 Management uses net cash flow from operations as a performance measure. Group Statement of Changes in Equity (Unaudited) For the six months ended 30 June Share Share Merger Available Hedging Foreign Retained Total Minority Total capital reserve for sale reserve currency earnings attributable interest Premium reserve translation to equity reserve shareholders Balance at 1 72 (14,229) (8) 13 420 17,024 3,292 2 3,294 January 2009 Comprehensive Income Net Income 613 613 613 Other comprehensive income Available for 8 8 8 sale assets, net of tax Actuarial (69) (69) (69) losses, net of tax Losses on (10) (10) (10) cash flow hedges, net of tax Net exchange (352) (352) (352) adjustments on foreign currency translation, net of tax Total other - - - 8 (10) (352) (69) (423) - (423) comprehensive income Total - - - 8 (10) (352) 544 190 - 190 comprehensive income Transactions with owners Share based 30 30 30 payments Deferred tax (1) (1) (1) on share awards Treasury 44 44 44 shares re-issued Dividends (341) (341) (341) Total - - - - - - (268) (268) - (268) transactions with owners Balance at 30 72 (14,229) - 3 68 17,300 3,214 2 3,216 June 2009 Comprehensive Income Net Income 805 805 805 Other comprehensive income Available for sale assets, net of tax Actuarial 1 1 1 losses, net of tax Losses on (5) (5) (5) cash flow hedges, net of tax Net exchange 161 161 161 adjustments on foreign currency translation, net of tax Total other - - - - (5) 161 1 157 157 comprehensive income Total (5) 161 806 962 962 comprehensive income Transactions with owners Share based 29 29 29 payments Deferred tax (2) (2) (2) on share awards Current tax 29 29 29 on share awards Treasury 87 87 87 shares re-issued Dividends (307) (307) (307) Total - - - - - - (164) (164) (164) transactions with owners Group Statement of Changes in Equity (Unaudited) For the six months ended 30 June Share Share Merger Available Hedging Foreign Retained Total Minority Total capital reserve for sale reserve currency earnings attributable interest Premium reserve translation to equity reserve shareholders Balance at 31 72 - (14,229) - (2) 229 17,942 4,012 2 4,014 December 2009 Comprehensive Income Net Income 728 728 - 728 Other comprehensive income Available for sale assets, net of tax Actuarial (23) (23) (23) losses, net of tax Losses on 2 2 2 cash flow hedges, net of tax Net exchange 80 80 80 adjustments on foreign currency translation, net of tax Total other - - - 2 80 (23) 59 59 comprehensive income Total - - - 2 80 705 787 787 comprehensive income Transactions with owners Share based 32 32 32 payments Deferred tax 1 1 1 on share awards Proceeds from 1 46 47 47 share issue Treasury 20 20 20 shares re-issued Dividends (411) (411) (411) Total 1 46 - - - - (358) (311) (311) transactions with owners Balance at 30 73 46 (14,229) - - 309 18,289 4,488 2 4,490 June 2010 Notes to the Half Year Condensed Financial Statements (Unaudited) 1. General Information Reckitt Benckiser Group plc is a public limited company incorporated and domiciled in the UK. The address of its registered office is 103-105 Bath Road, Slough, Berkshire SL1 3UH. The Company is listed on the London Stock Exchange. The Half Year Condensed Financial Statements were approved by the Board of Directors on 23 July 2010. This condensed consolidated interim financial information has been reviewed, not audited. 2. Basis of Preparation The Half Year Condensed Financial Statements for the six months ended 30 June 2010 have been prepared in accordance with IAS 34, `Interim financial reporting' as adopted by the European Union and as issued by the International Accounting Standards Board and with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. The Half Year Condensed Financial Statements should be read in conjunction with the Annual Report and Financial Statements for the year ended 31 December 2009, which have been prepared in accordance with IFRSs as adopted by the European Union and IFRSs as issued by the International Accounting Standards Board. 3. Accounting Policies Except as described below, the accounting policies applied are consistent with those described on pages 30-33 of the Annual Report & Financial Statements for the year ended 31 December 2009. Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings. The following standards, amendments and interpretations became effective for the first time for the financial year beginning 1 January 2010 but either have no material impact or are not relevant to the Group : * IFRS 1 (Revised), `First time adoption' and Amendments to IFRS 1 for additional exemptions * IFRS2 (Amendment), `Share based payments - Group cash-settled share based payment transactions' * IFRS 3 (Revised), `Business combinations' * IAS 27 (Revised), `Consolidated and separate financial statements' * IAS 39 (Amendment), `Financial instruments: recognition and measurement' on `Eligible hedged items' * IFRIC 17, `Distributions of non cash assets to owners' * IFRIC 18, `Transfer of assets from customers' There are also a number of changes to standards as a result of the annual improvements to IFRSs 2009, mainly effective for the financial year beginning 1 January 2010. These had no material impact on the Group. 4. Operating Segments Management has determined the operating segments based on the reports reviewed by the Executive Committee, which is considered the Chief Operating Decision Maker (CODM), that are used to make strategic decisions. The Executive Committee considers the business principally from a geographical perspective, but with the Pharmaceuticals business (RBP) being managed separately given the significantly different nature of the business and the risks and rewards associated with it. The geographical segments, being Europe, NAA and Developing Markets, derive their revenue primarily from the manufacture and sale of branded products in Household Cleaning and Health & Personal Care, whilst RBP derives its revenue exclusively from the sales of buprenorphine-based prescription drugs used to treat opiate dependence. The Executive Committee assesses the performance of the operating segments based on net revenue and adjusted operating profit. This measurement basis excludes the effects of exceptional items. There have been no exceptional items in the current and prior periods. The adjusted operating profit is the same as the reported operating profit. Finance income and expense are not allocated to segments, as they are managed on a central Group basis. Inter segment revenues are charged according to internally agreed pricing terms that are designed to be equivalent to an arm's length basis, and have been consistently applied throughout 2009 and 2010. Half Year Ended 30 June Europe NAA Developing RBP Elimination Total Markets 2010 £m £m £m £m £m £m Total gross segment net 1,813 1,073 934 310 (66) 4,064 revenue Inter-segment revenue (61) - (5) - 66 - Net revenue 1,752 1,073 929 310 - 4,064 Operating profit 401 206 142 215 - 964 Net finance income 7 Profit before tax 971 Europe NAA Developing RBP Elimination Total Markets 2009 £m £m £m £m £m £m Total gross segment net 1,838 1,008 742 254 (59) 3,783 revenue Inter-segment revenue (56) - (3) - 59 - Net revenue 1,782 1,008 739 254 - 3,783 Operating profit 403 169 98 149 - 819 Net finance expense (3) Profit before tax 816 Items of income and expense which are not part of the results and financial position of the reported segments, and therefore reported to the CODM outside of the individual segment financial information, are shown as reconciling items between the segmental information and the Group totals presented in the consolidated financial statements. These items principally include corporate items that are not allocated to specific segments. For the six months ended 30 June 2010, these items include a profit on disposal of intangibles and an expense relating to legal matters. The net impact of these items is £nil (30 June 2009: £nil). There were no material movements in the total assets by segment since 31 December 2009. Net revenue by product segment The Group also analyses its revenue by the following product groups: Fabric Care, Surface Care, Dishwashing, Home Care, Health & Personal Care, together with Other Household, Pharmaceuticals and Food. Half Year Ended 30 June 2010 2009 £m £m Net revenue by category Health & Personal Care 1,070 978 Fabric Care 805 807 Surface Care 686 635 Home Care 562 509 Dishwashing 453 440 Other Household 32 28 Household and Health & 3,608 3,397 Personal Care Pharmaceuticals 310 254 Food 146 132 4,064 3,783 5. Defined Benefit Pension Schemes The Group operates a number of defined benefit and defined contribution pension schemes around the world covering many of its employees. The Group's two most significant defined benefit pension schemes (UK and US) are both funded by the payment of contributions to separately administered trust funds. The Group also operates a number of other post-retirement schemes in certain countries. As at 30 June 2010, the present value of the Group's scheme liabilities less the fair value of plan assets was a deficit of £411m (31 December 2009: deficit of £371m). At 30 June At 30 June At 31 December 2010 2009 2009 £m £m £m Total equities 435 351 438 Total bonds 312 282 308 Total other assets 60 63 55 Fair value of plan assets 807 696 801 Present value of scheme liabilities (1,218) (1,058) (1,172) Net liability recognised in the (411) (362) (371) balance sheet The net pension liability is recognised in the balance sheet as follows: At 30 June At 30 June At 31 December 2010 2009 2009 £m £m £m Non-current asset: Funded scheme surplus 19 17 22 Non-current liability: Funded scheme deficit (223) (178) (193) Unfunded scheme liability (207) (201) (200) Retirement benefit obligations (430) (379) (393) Net pension liability (411) (362) (371) 6. Income Taxes Income tax expense is recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the year to 31 December 2010 is 25% (the estimated tax rate for the six months ended 30 June 2009 was 25%). A number of changes to the UK Corporation tax system were announced in the June 2010 Budget Statement. The Finance (No 2) Act 2010 is expected to include legislation to reduce the UK corporate rate of taxation from 28% to 27% from 1 April 2011. Further reductions to the main rate are proposed to reduce the rate by 1% per annum to 24% by 1 April 2014. The changes have not been substantively enacted at the balance sheet date and, therefore, are not included in these Half Year Condensed Financial Statements. The impact for the year is not considered to be material. 7. Earnings per Share Basic Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company (2010: £728m; 2009: £613m) by the weighted average number of ordinary shares in issue during the period (2010: 722,938,221; 2009: 710,615,636). Diluted Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding to assume conversion of all potentially dilutive ordinary shares. The Company has two categories of dilutive potential ordinary shares: Executive Options and Employee Sharesave schemes. The options only dilute earnings per share when they result in the issue of shares at an exercise price below the market price of the share and when all performance criteria (if applicable) have been met. As at 30 June 2010, there were nil (2009: 10.4m) of Executive Options not included within the dilution because the contingent performance targets had not been met. Reported Basis The reconciliation between profit for the half year and the weighted average number of shares used in the calculations of the diluted earnings per share is set out below: 2010 2009 Profit Average Earnings Profit Average Earnings for number of per for number of per the shares share, the shares share, half pence half pence year, year, £m £m Profit attributable to 728 722,938,221 100.7 613 710,615,636 86.3 shareholders Dilution for Executive 10,173,766 9,241,605 options outstanding and Executive Restricted Share Plan Dilution for Employee 888,394 808,000 Sharesave Scheme options outstanding On a diluted basis 728 734,000,381 99.2 613 720,665,241 85.1 8. Dividends A final dividend in respect of the financial year ended 31 December 2009 of 57.0 pence per share amounting to £411m was paid on 27 May 2010 to shareholders who were on the register on 26 February 2010. The Directors are proposing an interim dividend in respect of the financial year ending 31 December 2010 of 50.0 pence per share which will absorb an estimated £361m of shareholders' funds. It will be paid on 30 September 2010 to shareholders who are on the register on 4 August 2010. The expected tax impact of this dividend is £nil (2009: £nil). 9. Property, Plant and Equipment During the period there were additions of £53m (2009: £64m) and disposals of £ 5m (2009: £2m). The additions and disposals were across all categories of property, plant and equipment. There was no significant capital expenditure which was contracted but not capitalised at 30 June 2010 or 2009. 10. Financial Liabilities - Borrowings At 30 June At 30 June At 31 December 2010 2009 2009 Current £m £m £m Bank loans and overdrafts (a) 83 18 26 Commercial paper (b) - 1,005 104 Finance lease obligations 2 3 2 85 1,026 132 At 30 June At 30 June At 31 December 2010 2009 2009 Non-current £m £m £m Finance lease obligations 3 6 4 3 6 4 a) Bank loans are denominated in a number of currencies; all are unsecured and bear interest based on relevant LIBOR equivalent. b) Commercial paper was issued in a number of currencies, all unsecured and bearing interest based on relevant LIBOR equivalent. At 30 June At 30 June At 31 December 2010 2009 2009 Maturity of debt £m £m £m Bank loans and overdrafts repayable: Within one year or on demand 83 18 26 Other borrowings repayable: Within one year or on demand: Commercial paper - 1,005 104 Finance leases 2 3 2 Between two and five years : Finance leases (payable by instalments) 3 6 4 5 1,014 110 Gross borrowings (unsecured) 88 1,032 136 Borrowing facilities The Group has various borrowing facilities available to it. The undrawn committed facilities available, in respect of which all conditions precedent have been met at the balance sheet date, were as follows: At 30 June At 30 June At 31 2009 December 2009 2010 Undrawn committed facilities £m £m £m Expiring within one year 900 25 25 Expiring between one and two years - 900 900 Expiring in more than two years 750 750 750 1,650 1,675 1,675 11. Provisions for Liabilities and Charges Restructuring Other Total provision provisions £m £m £m At 1 January 2009 51 53 104 Acquisition of subsidiary (note 14) - 7 7 Charged to the income statement - 8 8 Transfers - 19 19 Utilised during the year (20) (7) (27) Exchange adjustments (3) (3) (6) At 30 June 2009 28 77 105 Charged to the income statement 29 6 35 Utilised during the year (5) (11) (16) Exchange adjustments - - - At 31 December 2009 52 72 124 Charged to the income statement - 6 6 Utilised during the year (19) (11) (30) Exchange adjustments 1 1 2 At 30 June 2010 34 68 102 Provisions have been analysed between current and non-current as follows: At 30 June At 30 June At 31 December 2009 2010 2009 £m £m £m Current 60 64 88 Non-current 42 41 36 102 105 124 Other provisions include provisions for onerous leases, various legal, environmental and other obligations throughout the Group, the majority of which are expected to be utilised within five years. The restructuring provision relates to further restructuring of configuration in the Group. The majority is expected to be utilised in 2010. 12. Share Capital Equity Nominal Subscriber Nominal ordinary value ordinary value Authorised shares £m shares £m At 1 January 2010 Ordinary shares of 10p each 945,500,000 95 945,500,000 95 At 30 June 2010 Ordinary shares of 10p each 945,500,000 95 945,500,000 95 Issued and fully paid At 1 January 2010 722,368,512 72 2 - Allotments 2,816,983 1 At 30 June 2010 725,185,495 73 2 - 13. Contingent Liabilities Contingent liabilities for the Group, comprising guarantees relating to subsidiary undertakings, at 30 June 2010 amounted to £30m (31 December 2009: £ 28m, 30 June 2009: £28m). The Group is involved in a number of investigations by competition authorities in Europe. Where it is too early to determine the likely outcome of these matters, the Directors have made no provisions for such potential liabilities. As disclosed at the year end, the Group has received a Statement of Objections from the Office of Fair Trading in the United Kingdom regarding alleged anti-competitive activity involving the Gaviscon brand. In the event that the Office of Fair Trading finds against the Group, it may impose a fine of up to the statutory maximum of ten percent of Group worldwide turnover. The Board considers it appropriate to disclose a contingent liability in this regard. The Directors at this stage believe that there are substantive questions of law brought forward by the Statement of Objections, questions that have not been settled in prior competition law cases and which require thorough analysis and debate. 14. Post Balance Sheet Events Share capital issued since 30 June 2010 In the period 30 June 2010 to 23 July 2010 the Company has issued 7,763 ordinary shares. Buy back of remaining rights to Suboxone and Subutex On 19 March 2010 Reckitt Benckiser announced that it is buying back the sales and marketing rights to the buprenorphine-containing products Suboxone, Subutex, and Temgesic from Merck & Co., Inc. for approximately £100 million. The rights will apply to a number of countries in Europe and the rest of the world starting 1 July 2010. Recommended cash offer to acquire SSL International plc On 21 July 2010, the Boards of Reckitt Benckiser plc and SSL International plc ("SSL") announced that they had reached agreement on the terms of a recommended cash offer to acquire the entire issued and to be issued capital of SSL (the "Offer"). Under the terms of the Offer, SSL shareholders will be entitled to receive 1,163 pence in cash for each SSL share, and will also remain entitled to receive the proposed final SSL dividend of 8 pence per share in respect of the year ended 31 March 2010, representing, in aggregate, 1,171 pence per SSL share. The Offer price plus the SSL dividend values SSL's fully diluted share capital at approximately £2,540 million. It is currently expected that, if successful, the Offer would become or be declared unconditional in all respects during the fourth quarter of 2010. Since 30 June 2010 the necessary committed borrowing facilities have been put in place to fund the Offer. Interim Dividend Details of the interim dividend proposed are given in note 8. 15. Seasonality Demand for the majority of products sold by the Group is not subject to significant seasonal fluctuations. Within some categories such as Health & Personal Care and Pest Control, some products do exhibit seasonal fluctuations; however, peak demand in the northern hemisphere markets largely tends to counter that in the southern hemisphere markets. Other less significant seasonal relationships also occur within the Group, which do not have a material impact on overall performance of the Group in any one quarter. 16. Related Party Transactions There have been no changes in the related party transactions from those described in the Financial Statements 2009. There were no material related party transactions in the six months to 30 June 2010. Statement of Directors' Responsibilities The Directors confirm that, to the best of their knowledge, these Half Year Condensed Financial Statements have been prepared in accordance with IAS 34 as adopted by the European Union and as issued by the International Accounting Standards Board. The interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely: * An indication of important events that have occurred during the first six months of the financial year and their impact on the Half Year Condensed Financial Statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and * Material related party transactions in the first six months of the financial year and any material changes in the related party transactions described in the last annual report. The Directors of Reckitt Benckiser Group plc are listed in the Reckitt Benckiser Group plc Annual Report and Financial Statements for 31 December 2009. A list of current Directors is maintained on the Reckitt Benckiser Group plc website: www.reckittbenckiser.com. By order of the Board Bart Becht Chief Executive Officer Adrian Bellamy Director 23 July 2010 Independent Review Report to Reckitt Benckiser Group plc Introduction We have been engaged by the Company to review the Half Year Condensed Financial Statements in the half-yearly financial report for the six months ended 30 June 2010, which comprises the Group income statement, the Group statement of comprehensive income, the Group balance sheet as at 30 June 2010, the Group cash flow statement, the Group statement of changes in equity and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the Half Year Condensed Financial Statements. Directors' responsibilities The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union and IFRSs as issued by the International Accounting Standards Board. The Half Year Condensed Financial Statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, `Interim Financial Reporting', as adopted by the European Union and as issued by the International Accounting Standards Board. Our responsibility Our responsibility is to express to the Company a conclusion on the Half Year Condensed Financial Statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, `Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the Half Year Condensed Financial Statements in the half-yearly financial report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union, and as issued by the International Accounting Standards Board, and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. PricewaterhouseCoopers LLP Chartered Accountants 23 July 2010 London Notes: a. The maintenance and integrity of the Reckitt Benckiser Group plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the Half Year Condensed Financial Statements since they were initially presented on the website. b. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

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